Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Which of the following types of receivables would be considered the most liquid?

Notes receivable (due in 2 years)

Accounts receivable

Interest receivable

Advances to employees

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Verified step by step guidance

Understand the concept of liquidity: Liquidity refers to how quickly an asset can be converted into cash without significant loss of value. In the context of receivables, the most liquid receivable is the one that can be collected or converted into cash the fastest.

Analyze each type of receivable: Notes receivable (due in 2 years) is not highly liquid because it has a long-term maturity. Interest receivable depends on the timing of interest payments, which may not be immediate. Advances to employees are not liquid because they are essentially prepayments and may not be recoverable quickly.

Focus on accounts receivable: Accounts receivable represents amounts owed by customers for goods or services provided on credit. These are typically collected within a short period, such as 30 to 60 days, making them highly liquid.

Compare accounts receivable to other receivables: Since accounts receivable are expected to be collected in the shortest timeframe compared to the other options, they are considered the most liquid.

Conclude based on liquidity: Accounts receivable is the most liquid type of receivable among the options provided because it is closest to being converted into cash in the normal course of business operations.